Thursday, January 29, 2009

So is December's rise in existing home sales the early sign of a market rebound or a statistical anomaly on the way to further declines? A story in Reuters ponders the question:

Until now, plunging home prices have been keeping many potential home buyers at bay because they were leery of buying an asset that was all but guaranteed to lose value, at least initially.

Now, though, prices appear to have fallen enough in some regions to make buying cheaper than renting, particularly in the West. Add with record low mortgage rates, demand has started to rebound...

Home prices have dropped so much in some areas of California that monthly mortgage payments on single-family detached homes are comparable to apartment rents.

And while distressed properties account for an abundance of sales around the country, the trend is nevertheless helping assuage one of the market's biggest banes: a huge supply of unsold homes.

Existing home sales across the United States rose 6.5 percent to an annual rate of 4.74 million units in December from a rate of 4.45 million in November, a National Association of Realtors report showed on Monday. That said, in 2008, existing home sales fell 13.1 percent to 4.91 million units -- the lowest since 1997...

"The report confirms our forecast that sales have bottomed," said Celia Chen, senior director of housing economics at Moody's Economy.com in West Chester, Pennsylvania.

"The price discounting on foreclosures is helping draw down on inventories, particularly in the West where lower prices are helping pull in new buyers," she said.

2 comments:

It's a blip. No real good news here. There's no underlying economic change to support housing turning a corner.

It's true that housing prices in many areas have fallen to enticing levels, and mortgage rates are at all time lows, but...there's too many other problems for this to be sustainable: tighter lending standards, dramatically slowing economic activity, shrinking individual net worths, zero consumer confidence, and on and on...

Patrick,Housing may have turned a corner, but not the one where things start improving on their own momentum. Unfortunately, too many forces are negative. What we're likely seeing are exceptions to a rule of deterioration. We're seeing rare cases where prices for homes seem to be synching up with incomes and rent comps. But reality is still in flux. As a society, we've capitulated on selected "normal levels," but we cling on to other levels that were propped up by a global liquidity bubble that is resetting. So there's more to wipe out to get to a real normal. Whether most economists acknowledge it or not, one in 10 of us is going to be out of work. That's not a signal that we've really turned the corner on housing just yet. Cheers.http://www.housingcrisis.com